25 April, 2024



Judge Zia Faruqui Sets Cooperative Tone in Binance.US vs. SEC Legal Battle

19 Sep, 2023

28 Nov, 2023

  • Judge Zia Faruqui encouraged Binance.US and the SEC to work together on discovery requests, criticizing the SEC’s broad information demands.
  • The judge set an October 10 deadline for a joint status report and a follow-up hearing for October 12.
  • Binance.US attorney Matthew Martens dismissed the SEC’s “foolishness of document requests,” stating they have responded to every targeted request.

During a pivotal hearing between Binance.US and the U.S. Securities and Exchange Commission (SEC), U.S. Magistrate Judge Zia Faruqui encouraged both parties to collaborate on discovery requests. The judge set a cooperative tone for the case, advising that they should “work this out” together rather than relying on court mandates. He also criticized the SEC for what he termed a “fishing expedition,” referring to the agency’s broad and potentially unrelated information requests.

Judge Faruqui also directed the SEC to be more specific in its information requests. He allowed for the deposition of certain shareholders to assess the safety of Binance.US’s funds. Additionally, the judge indicated that Binance.US should provide more details about its relationship with its service provider, Ceffu. Expressing reservations about the parent company of Binance.US, BAM Trading, the judge noted that they “need more” information to fully understand their control over assets.

While the court did not grant the SEC’s immediate request for an inspection, it did express concerns about Binance.US’s control over its assets, suggesting that additional documentation is required. The SEC’s concerns are rooted in the relationship between the custody platform Ceffu and Binance Holdings Limited, the global parent company. 

The regulator suspects that Ceffu is more closely tied to Binance Holdings than allowed by a pre-existing agreement. This agreement mandates that Binance.US keep U.S. customer funds in wallets accessible only by U.S. personnel.

Jennifer Farer, an attorney for the SEC, emphasized the regulator’s need for a wide range of information about Binance.US’s new wallet arrangements. She pointed out that they “don’t know” what they’re missing, highlighting the SEC’s uncertainty and the challenges it faces in obtaining a clear understanding of the situation. The SEC had earlier complained about the quality of information provided by Binance and its U.S. arm, stating that they had only turned over about 250 pages of evidence, some of which consisted of unintelligible screenshots.

The judge has set an October 10 deadline for a joint status report, followed by another hearing on October 12. The SEC initially filed a lawsuit against Binance and its founder, Changpeng “CZ” Zhao, in June, accusing them of operating an unlicensed securities exchange. Since then, the SEC has been working to ensure that assets from U.S. customers remain in the U.S.

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